2023 (5) TMI 963 - HC - Income Tax

Re-assessment u/s 148 Invalidated Due to Change of Opinion and Improper Authority in Tax Case.

The HC held the re-assessment proceedings under Section 148 of the Income Tax Act, 1961, invalid due to a change of opinion and improper authority ... Validity of Reopening of assessment - assessment of the petitioner company was not done u/s 143(1) but u/s 143(3) - Deduction u/s 80IC - HELD THAT:- As the proceeding initiated against the petitioner company u/s 148 is found vitiated on two counts, viz., in this case, the petitioner (assessee) had made full and true disclosure of facts at the time of original assessment and also at the time of scrutiny proceeding u/s 143(2) and 143(3) - Assessee had no duty beyond that. It was for the assessing officer to draw correct inference from the primary facts. Therefore, if subsequent to assessment made u/s 143(3) AO draws an inference that assessment made by him was erroneous, such a change in opinion would not justify action for re-opening assessment. Sanction / Satisfaction of the proper authority u/s 151(1) - Income Tax Officer, Ward-I, Tinsukia had obtained satisfaction of Additional Commissioner of Income Tax, an authority who is not covered by the provision of Section 151(1) - The said notice was issued after obtaining the satisfaction of the Additional Commissioner of Income Tax. Thus, it prima facie appears that in view of the prescription of Section 151(1) by necessary implication, the 'Additional Commissioner of Income Tax' would not be same as 'Principal Chief Commissioner' or 'Chief Commissioner' or 'Principal Commissioner' or 'Commissioner' of Income Tax. Therefore, on the ground that the Income Tax Officer, Ward-I, Tinsukia had obtained satisfaction of Additional Commissioner of Income Tax, an authority who is not covered by the provision of Section 151(1) as it stood on 01.01.2019, the proceeding initiated against the petitioner company by issuance of notice u/s 148 is held to be not in accordance with law. A possible plea could have been raised by the Income Tax authorities that this writ petition would not be maintainable as the petitioner could avail ordinary remedy of filing an appeal against the order of re- assessment. Thus under the unique facts of this case, this writ petition under Article 226 of the Constitution would be maintainable because the two pre-conditions for exercise of power under Section 148 of the Income Tax Act, 1961 does not exist in this case. However, this observation is qua this case and is not to be considered as a precedent in any other case. Notices quashed. Issues Involved:1. Validity of re-assessment proceedings under Section 148 of the Income Tax Act, 1961.2. Limitation period for issuing notice under Section 148.3. Authority for granting satisfaction for re-assessment under Section 151.Summary:1. Validity of Re-assessment Proceedings:The petitioner challenged the re-assessment proceedings initiated by the Income Tax Officer, Ward-I, Tinsukia under Section 148 of the Income Tax Act, 1961. The original assessment for the assessment year 2014-15 was completed under Section 143(3) allowing the deduction under Section 80-IC. The Court observed that the re-assessment was based on a change of opinion, as the Income Tax Officer had already scrutinized and accepted the deduction during the original assessment. The Court held that 'if subsequent to assessment made under Section 143(3) of the Income Tax Act, 1961, the assessing officer draws an inference that assessment made by him was erroneous, such a change in opinion would not justify action for re-opening assessment.'2. Limitation Period:The petitioner argued that the notice dated 01.01.2019 was barred by limitation. The Court referred to Section 149(1)(b) of the Income Tax Act, 1961, which allows for a notice to be issued within six years if the escaped income is likely to amount to one lakh rupees or more. Since the income allegedly escaped was Rs.47,15,369/-, the notice was issued within the permissible period, and thus, the Court decided this point against the petitioner.3. Authority for Granting Satisfaction:The petitioner contended that the notice under Section 148 was issued after obtaining satisfaction from the Additional Commissioner of Income Tax, not the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as required under Section 151(1). The Court held that 'the Income Tax Officer, Ward-I, Tinsukia had obtained satisfaction of Additional Commissioner of Income Tax, an authority who is not covered by the provision of Section 151(1) of the Income Tax Act, 1961,' making the re-assessment proceedings not in accordance with law.Conclusion:The Court found the re-assessment proceedings vitiated on two counts: the change of opinion and the improper authority granting satisfaction. Consequently, the impugned notice dated 01.01.2019 and the subsequent letter dated 20.05.2019 were set aside and quashed. The writ petition was allowed, and the interim order dated 13.06.2019 was merged with the final order. No costs were awarded.